Investors sell off Adoni shares for 2.5 billion
2023.01.31 08:39
Investors sell off Adoni shares for 2.5 billion
By Ray Johnson
Budrigannews.com – Despite a $65 billion decline in the Indian billionaire’s stocks caused by a short-seller’s report, Tuesday’s crucial $2.5 billion share sale was fully subscribed as investors poured money into his flagship company.
Not only will the fundraising help Adani reduce his group’s debt, but it is also seen by some as a sign of confidence at a time when the tycoon is facing one of his biggest business and reputational obstacles.
Last week, a report from Hindenburg Research said that Adani was using offshore tax havens improperly and that he was worried about having too much debt. Adani denied these claims, but the market crash that followed has caused Adani’s fortunes to drop dramatically, dropping him to eighth from third on the Forbes Rich List.
Maybank Securities and Abu Dhabi Investment Authority, as well as India’s HDFC Life Insurance and state-backed Life Insurance Corporation, participated in India’s largest secondary share sale ever.
However, despite the fact that the 30% anchor portion of the issue had been fully subscribed to last week, the book building only had 3% of bids on Monday due to concerns regarding the stock market decline at Adani.
Despite the influx of foreign institutional investors and corporate funds on Tuesday, participation from retail investors and Adani Enterprises employees remained low, the overall share sale was fully subscribed.
Leonard Law, Senior Credit Analyst at Lucror Analytics Singapore, stated on Tuesday, “Investors would view the successful completion of the FPO (follow-on public offering) as a welcome relief, as it implies that the company still has the support of institutional investors.”
Law continued, “The FPO would help to enlarge Adani Enterprises’ public float (thereby partially addressing the issue regarding the promoters’ concentrated shareholding), reduce the company’s leverage, and improve investor sentiment.”
Adani’s public confrontation with Hindenburg Research, which raised concerns about the group’s use of tax havens and “substantial debt,” comes just a few days before the offer expires. It went on to say that, as a result of what it referred to as “sky-high valuations,” shares in seven Adani-listed businesses are down 85 percent.
The Adani group has stated that it complies with all laws and disclosure requirements. It also stated that it is considering taking legal action against Hindenburg and called the report baseless.
Even though the flagship’s shares closed at 2,973.9 rupees, up nearly 3 percent but below the lower end of the sale price band of 3,112 rupees, support for the share sale was there.
In the fiscal year that ended on March 31, 2022, Adani Group’s total gross debt increased by 40% to 2.2 trillion rupees, or $26.63 billion. In response to Hindenburg’s claims, Adani stated on Sunday that the group has “consistently de-levered” over the past decade.
Adani described the Hindenburg report as a “calculated attack” on India’s institutions, and the company’s chief financial officer compared the market collapse of its stocks to a massacre during the colonial era.
Adani’s “response largely confirmed our findings and ignored our key questions,” Hindenburg stated later.
V. Anantha Nageswaran, India’s chief economic adviser, told reporters that the “corporate sector as a whole has deleveraged and their balance sheets are healthy” when asked about the Adani-Hindenburg saga. Therefore, the market and the corporate group determine what happens to a particular group of companies.
In recent days, Adani had repeatedly stated that investors were on its side and that the share offering would proceed. According to Reuters, bankers had thought about changing the issue’s price or making the sale last longer.
Non-institutional investors with investments of more than one million rupees each made up the majority of the demand during the public book building process, with bids totaling five times the offered shares. The amount subscribed was 1.2 times the amount for qualified institutional buyers, which included foreign investors.
However, neither domestic mutual funds nor domestic banks or financial institutions submitted bids. Additionally, retail investors and company employees offered only 12% and 55% of the available shares, respectively.
“The Hindenburg report has had a negative impact on sentiment, particularly in the retail sector. Ambareesh Baliga, an independent market analyst based in Mumbai, stated, “They haven’t been able to broadbase the shareholding.” The FPO had two goals: to raise funds to reduce debt and to broaden the shareholding.
According to two sources with direct knowledge of the discussions, Adani’s company held extensive discussions with investment bankers and institutional investors over the weekend and into Monday to attract subscriptions.
Although the names of the investors have not yet been made public, International Holding Company, an Abu Dhabi conglomerate, announced late on Monday that it will invest $400 million.
After losing 38% since the Hindenburg report, Adani Transmission closed nearly 4% higher on Tuesday, while Adani Ports and Special Economic Zone gained 2.6%.
At its lower price limit, Adani Total Gas lost 10%, while Adani Power and Adani Wilmar lost 5% each.
In its report, Hindenburg stated that it had shorted Adani Group derivatives that were not traded in India and U.S. bonds. Bonds issued by Adani Ports and Special Economic Zone in U.S. dollars continued to fall into the second week on Tuesday.
